Impact of proposed Bill on foreign land ownership

© Chad Zuber – 123RF.com

There are currently no restrictions on the ownership of land by foreigners in South Africa.

However, in President Jacob Zuma's 2015 State of the Nation address, delivered on 12 February 2015, the President indicated that, in terms of the proposed Regulation of Land Holdings Bill (the proposed Bill) which will be submitted to Parliament during the course of this year, 'foreign nationals' will no longer be allowed to own certain types of land in South Africa (although they will be allowed to enter into long-term leases over all types of land).

This announcement has caused widespread concern and confusion, both in South Africa and among foreign investors. As a result, the Presidency released a statement on 14 February 2015 in an attempt to clarify the announcement.

In terms of this statement:

• The proposed Bill will only be applicable to agricultural land and not residential, commercial or industrial land.
  
• The restriction on foreign land ownership will apply to foreign nationals and juristic persons, being non-South African citizens and juristic persons whose dominant shareholder or controlling shareholder is a foreign-controlled enterprise, entity or interest.
  
• In terms of the proposed Bill, foreign nationals and juristic persons will not be able to own land in freehold 'from the time the policy is passed into law', i.e. the proposed Bill will not apply retrospectively and those who have already acquired freehold will not have their tenure changed by the passing of the proposed legislation (although, in these cases, a right of first refusal will apply in favour of another South African citizen in freehold or the state, if the land is deemed strategic).
  
• While foreign nationals and juristic persons will not be allowed to own land, they will be eligible for long-term leases of between 30 and 50 years.
  
• Environmentally sensitive lands, land with a 'security' sensitivity, land which is historic and has cultural significance, and strategic land (i.e. for land reform and socio-economic development) will be classified by law and land ownership by foreign nationals and juristic persons in these areas will be discouraged.

As is set out above, the proposed Bill will only be applicable to agricultural land and not residential property, i.e. foreign companies buying industrial or commercial property and foreign individuals planning to buy homes or residences in South Africa will not be affected. A multi-national corporation will only be affected if they purchase agricultural land in future.

Ceiling on agricultural land

The proposed Bill will also impose a maximum ceiling of 12,000ha on agricultural land owned by all legal and natural persons (including South Africans) and it is proposed that any agricultural land held by a single individual in excess of this maximum ceiling will be bought and redistributed by the State. The proposed Bill is likely to introduce a compulsory land holdings disclosure, managed through a Land Commission, which will require all land owners to declare their race, gender and nationality, how much land they own, and what it is used for.

The proposed Bill is still being drafted and is expected to be submitted to Parliament during the course of this year. There is no defined time period within which a Bill becomes an Act - the legislative process can take months or even years depending on numerous factors such as the controversy or urgency of the subject matter to be addressed by a proposed Bill. This means that it cannot be stated with certainty when the proposed Bill will be passed into law.

The content and nature of the proposed Bill may also change a number of times over this period. However, it is understood that the government plans for the proposed Bill to be law in South Africa within the next five years, i.e. by the year 2019.